Sukhwinder Singh v Makhan Singh Bains & Anor

In determining whether an oral contract existed, the court may consider what the parties said and did after the alleged agreement. Such evidence assists the fact-finding exercise and tests recollection; it does not retrospectively alter the agreement. The rule excluding subsequent conduct in construing a complete written contract does not apply in the same way.

Without prejudice privilege requires an objectively ascertainable dispute or issue to be resolved. An opening proposal may attract privilege, but an assertion or discussion made before a real dispute exists, and not directed towards settling litigation, does not.

Where the evidence remains so unsatisfactory that the court cannot rationally choose between competing accounts, the burden of proof may determine the result. The claimant must still prove the alleged agreement on the balance of probabilities.

The claimant alleged that he and the first defendant had agreed to operate their businesses on an equal basis and that he would become an equal shareholder in G B Retail Limited. The first defendant accepted an agreement to share profits but denied any agreement to transfer or allot an equity interest.

The trial concerned the existence and terms of the alleged oral agreement, the admissibility of later conduct, the application of without prejudice privilege to communications concerning a possible division of assets, and the remedies sought if the agreement were proved. The court heard evidence from the parties, accountants and other witnesses.

1. The claims for specific performance, damages in lieu, damages for breach of the alleged oral agreement and rectification were dismissed.

2. The court held that the restriction derived from Miller and Partners Ltd v Whitworth Street (Manchester) Estates Ltd on using subsequent conduct in construing a written contract did not govern an alleged oral agreement. Determining what was agreed orally is principally a question of fact. Evidence of later words and conduct may be admitted to test recollection and assist the court in deciding what the parties objectively agreed at the time.

3. Without prejudice privilege did not apply to the January 2021 emails. Privilege depends upon an objectively existing dispute or issue to be resolved, although the concept of dispute is broad enough to include an opening shot in negotiations. Here the communications pursued an amicable division of assets, without a reasonably contemplated resort to litigation if agreement failed. The messages were therefore admissible.

4. The claimant bore the burden of proving the oral agreement on the balance of probabilities. Resort to the burden of proof is exceptional and appropriate only where, despite reasonable efforts, the court cannot rationally make a finding on the disputed issue. The claimant’s evidence was unreliable, contradictory and inconsistent with his pleaded case and earlier accounts. The accountant’s evidence was also inconsistent and did not corroborate the alleged agreement.

5. Alternatively, the first defendant’s account was preferred: the claimant was to receive an equal share of profits, not an equity interest. The registration of shares by the accountant, without proof that the first defendant agreed to the arrangement, did not establish the alleged oral agreement.